Kinled Investments Ltd v Zopa Group Ltd
| Jurisdiction | England & Wales |
| Judge | Klein |
| Judgment Date | 27 May 2022 |
| Neutral Citation | [2022] EWHC 1194 (Comm) |
| Docket Number | Claim No: LM-2021-000178 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 1194 (Comm)
HH JUDGE Klein SITTING AS A HIGH COURT JUDGE
Claim No: LM-2021-000178
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, EC4A 1NL
Paul O'Doherty (instructed by Brandsmiths SL Ltd.) for the Claimant
Alex Barden (instructed by Allen & Overy LLP) for the Defendant
Hearing dates: 5–8 April 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH JUDGE Klein
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 a.m. on 27 May 2022.
This is the judgment following the trial of a claim and counterclaim in relation to an introducer's/intermediary's fee. By the claim, the Claimant, Kinled, claims £4.2 million as a fee for having acted as an intermediary between the Defendant, Zopa, and an investor, Silverstripe. By the counterclaim, Zopa seeks to recover £345,000; the fee it paid Kinled for Kinled's initial introduction to it of Silverstripe. This case is not the first which has come to court in recent years in which intermediaries have claimed an introducer's fee (see, in particular, Becerra v. Close Bros., Thomas J, 25 June 1999, MSM Consulting Ltd. v. United Republic of Tanzania [2009] EWHC 121 (QB), Moorgate Capital (Corporate Finance) Ltd. v. HIG European Capital Partners LLP [2019] EWHC 1421 (Comm) and Premia Marketing Ltd. v. Regis Mutual Management Ltd. [2021] EWHC 2329 (QB)). The earlier cases were decided on their facts, more or less, and, as it turns out, the outcome of this case has turned largely on its facts. This case is unusual because, by it, Kinled does not claim a fee for its initial introduction of Silverstripe to Zopa. That fee – the £345,000 which Zopa now seeks to recover – has already been paid. Rather, Kinled claims an additional, intermediary's, fee, calculated at 3% of the sum invested, because Silverstripe made a second investment of £140 million in Zopa.
By the conclusion of the trial, Kinled's case was being pursued on only two of the bases on which it had begun the claim; namely, that a written agreement – the engagement letter – by which it was originally engaged, had been varied so as to cover Silverstripe's second investment in the circumstances which have happened and, alternatively, that Zopa is liable to pay the sum Kinled claims as a quantum meruit, because Kinled provided intermediary services relating to Silverstripe in the second investment round in both parties' anticipation and expectation that a contract for those services would eventuate. Much of the documentary evidence and the oral evidence was directed to the other bases for Kinled's claim which it no longer pursues.
Zopa's counterclaim was also advanced in a number of ways, including that, in making the initial introduction of Silverstripe (and another investor, Lida) to Zopa, Kinled carried out regulated activities contrary to the general prohibition in the Financial Services and Markets Act 2000 (“ FSMA”), so that, under s.26 of FSMA, the engagement letter is unenforceable and Zopa is entitled to recover the £345,000 it paid to Kinled for that introduction under the engagement letter.
I have come to the clear conclusion that:
i) there was no agreement to vary the engagement letter as Kinled contends;
ii) even if there was an agreement to vary the engagement letter as Kinled contends, it was not contractually binding because it was not supported by consideration;
iii) the intermediary work in issue which Kinled did was not done in anticipation that a contract would eventuate. Rather, both parties proceeded on the basis that any payment for that work would be made in accordance with the engagement letter, which does not entitle Kinled to any further payment in the circumstances which have happened;
iv) the claim therefore fails.
I have also come to the conclusion that:
i) in making its initial introduction in this case, Kinled was carrying out regulated activities;
ii) as a result, the engagement letter is unenforceable under s.26 of FSMA;
iii) however, in the particular circumstance of this case, it is just and equitable to permit Kinled to retain the £345,000 payment under s.28 of FSMA;
iv) therefore the counterclaim fails, Zopa having accepted (perhaps with s.28(9) of FSMA in mind) that, if its counterclaim under FSMA failed in the way it has done, the alternative bases on which it has brought its counterclaim fail too.
In this judgment I therefore propose to set out the evidence and the parties' submissions, and consider the parties' cases, only to the extent necessary to explain the reasons for my decision, although, to be clear, I have considered all the documentary evidence to which I was referred, all the evidence I heard (to which end, I have read the entirety of the trial transcript before preparing this judgment) and all the parties' submissions.
Cast list
It is helpful to begin by introducing the participants in the events to which I will be referring. The corporate structures are complicated but, as it turns out, do not need to be fully explored to understand the case. Similarly, who some of the individual participants are employed by and the relationship between their employers and the key businesses in the case are also complicated but do not need to be fully explored to understand the case.
The Claimant (“Kinled”) is, as Mr Novis explained, “a Hong Kong incorporated company which is a stand-alone part of a wider group of companies that make up a single family office”. A family office is a private wealth management advisory business which serves high net worth individuals, or families. Although the picture is not entirely clear, I formed the impression at trial that Kinled is, in effect, a vehicle through which the Aisher family invests its money. Mr Novis referred to Patrick Aisher as “the principal” when cross-examined on Zopa's FSMA counterclaim. That evidence and related evidence leads me to conclude that, where Mr Novis requires direction, he takes it from Mr Aisher (particularly in relation to FSMA-related issues).
Rupert Novis has been Kinled's investment director since 2014. Before that, he worked in the City in derivatives. He identifies investment opportunities for the Aisher family and manages the Aisher family's investment portfolio.
The Defendant (“Zopa”) is the holding company in a group also comprising Zopa Bank Ltd. and Zopa Ltd., both of which were FCA-regulated at the time. Zopa Ltd. was the first peer to peer lending intermediary company. On 24 June 2020, the Prudential Regulation Authority (“the PRA”) granted Zopa Bank Ltd. a full retail banking licence, having granted the bank an “AWR” licence (that is an authorisation with restrictions licence) on 3 December 2018. The period between the grant of the two licences is known as the mobilisation stage. During this period, a bank may take deposits, subject to restrictions, in preparation for the grant of a full licence after which it may trade fully. The repositioning of the Zopa business as a retail bank has apparently been successful. It was reported in the financial press in October 2021 that the business was a Dollar Unicorn (that is, it had a value of at least US$1billion), which is a significant increase in its value from the period to which this case relates. 1
Jaidev Janardana is, and was at the relevant time, Zopa's CEO. He has worked for Zopa since 2014. Before that he was employed by Capital One, a bank particularly known for its credit card business.
Jonathan Kramer also began working for Zopa in 2014, having previously been employed by Morgan Stanley. He joined Zopa as Head of Capital Markets, becoming its President in 2018. He reported to Stephen (known as Steve) Hulme, Zopa's Chief Financial Officer, who began working for Zopa in 2018, and to Mr Janardana. He was responsible, on a day to day basis, for managing the investment rounds which are in issue in this case.
During the period with which I am concerned, Gordon McCallum became the chairman of Zopa's board.
Tajmeet (known as Taj) Kalra was part of Mr Kramer's team at the relevant time.
Victoria Matthews is, and was at the relevant time, Zopa's in-house lawyer.
IAG Silverstripe LLC (“Silverstripe”) invested £10 million in Zopa in late 2018/early 2019 and a further £140 million in Zopa in June 2020. 2 As described to me by Mr Cuppage in cross-examination, for the purposes of this case in effect Silverstripe is the family office of the Hildebrand family (and possibly the family too of Chris Jones, Brett Hildebrand's business partner). Brett Hildebrand is, in effect, Silverstripe's principal (and is described as such on the agreed cast list prepared by the parties). Silverstripe and Mr Hildebrand are based in Charleston, South Carolina. Mr Hildebrand has a particular interest in the credit card business and has been actively involved in Credit One Bank, which operates one of the leading US credit card businesses. He is also interested, through corporate vehicles, in Jaja Finance Ltd., which operates Bank of Ireland's UK credit card business.
Nicholas Aspinall is a lawyer and an investment professional. He was heavily involved in the arrangements, on the Silverstripe side, leading to its investment in Zopa, and, I formed the impression at trial, has worked closely with Mr Hildebrand.
Alex Cuppage is also an investment professional. He too was heavily involved in the arrangements, on the Silverstripe side,...
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